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Wear v. Transamerica Life Insurance Co.

August 7, 2007


The opinion of the court was delivered by: Thomas A. Varlan United States District Judge



This is an action to recover $100,000 in life insurance proceeds under a group term life insurance policy offered by defendant Transamerica Life Insurance Company*fn1 (Transamerica) to employees at Carlex Glass Company (Carlex). Plaintiff, Fe Wear, a Carlex employee, originally filed this action on May 25, 2006, in the Circuit Court for Monroe County, Tennessee, seeking those policy limits after her husband, Ricky Wear, died from a shotgun blast to the chest during an altercation on September 24, 2004 [see Doc. 1-2, pp.4-7]. Plaintiff also seeks $25,000 as a bad faith penalty pursuant to Tenn. Code Ann. § 56-7-105.

On June 27, 2006, Transamerica timely removed the action to this Court, see 28 U.S.C. § 1446(b), alleging federal question jurisdiction, see 28 U.S.C. § 1331, based on the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq., as well as jurisdiction based on diversity of citizenship of the parties*fn2 and the amount in controversy exceeding $75,000. See 28 U.S.C. § 1332(a)(1). On July 17, 2006, Transamerica filed its answer, denying any and all liability to plaintiff [see Doc. 3]. This matter is currently set for a bench trial on August 21, 2007 [see Doc. 8, p.5] and is presently before the Court on the following motions by Transamerica:

1. Motion for summary judgment [Doc. 14] based on the fact that (a) Transamerica declined coverage because the spouse of a non-participating employee was not entitled to coverage; and (b) plaintiff made certain misrepresentations on the application about her husband's medical record which increased Transamerica's risk of loss; and

2. Motion to dismiss [Doc. 18] for plaintiff's failure to prosecute and, in particular, to comply with certain facets of the Court's scheduling order [Doc. 8] filed on December 19, 2006.

With respect to the pending motion for summary judgment, the record reflects that Transamerica has filed a thorough brief in support of its motion [see Doc. 15], and that the plaintiff has filed a response to that motion [see Doc. 16]. Moreover, Transamerica has filed an outstanding reply to plaintiff's response [see Doc. 17]. Nevertheless, in reviewing these briefs, the Court has identified two issues, one legal and one factual, which need further development before this matter can be adjudicated.*fn3


First, the Court observes that Transamerica primarily relies on Tennessee law to support its position that Ms. Wear's misrepresentations on the insurance application substantially increased its risk of loss and therefore allows Transamerica to refuse to pay her claim. Remarkably, plaintiff has cited no cases whatsoever in support of her position, nor has she made any effort to analyze or distinguish the cases relied on by Transamerica in its briefs. Plaintiff has made factual arguments only.*fn4 The initial dilemma for the Court, however, is whether the facts of this case are governed by Tennessee law or by federal ERISA law.

It is well established that if jurisdiction in this case were purely predicated on diversity of citizenship, this Court must apply state law. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Under the Erie doctrine, a federal court sitting in diversity must apply the choice of law rules of the state in which it sits. See Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 496 (1941); Tele-Save Merchandising Co. v. Consumers Distributing Co., 814 F.2d 1120, 1122 (6th Cir. 1987). Moreover, the insurance contract at issue apparently does not contain any enforceable choice of law provision. Consequently, in resolving contractual disputes in such a situation, Tennessee adheres to the rule of lex loci contractus. See Starr Printing Co., Inc. v. Air Jamaica, 45 F. Supp. 2d. 615, 629 (W.D. Tenn. 1999) (applying Tennessee law). Therefore, when the contract involves questions concerning the validity of a contract, the court applies the laws of the state where the contract was made. See Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d 465, 467 (Tenn. 1973). In this case, it appears that this contract was entered into in the State of Tennessee; thus, Tennessee law should be applied to the breach of contract issue, assuming, once again, that this is a case based purely on diversity of citizenship.

However, Transamerica also removed the case to this Court based on ERISA. ERISA's preemption clause states that the Act "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The Supreme Court has interpreted this clause to preempt state-law causes of action that would allow employee benefit plans to "obtain remedies under state law that Congress rejected in ERISA." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987). Such an interpretation is necessary, the Court has instructed, to give effect to Congress's intent "that the civil enforcement provisions of ERISA § 502(a) be the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of a claim for benefits." Id. at 52. Moreover, the Sixth Circuit has recognized the broad sweep of ERISA preemption provision in relation to state-law causes of action based upon an improper denial of benefits, "noting that 'virtually all state law claims relating to an employee benefit plan are preempted by ERISA.'" Caffey v. Unum Life Ins. Co., 302 F.3d 576, 582 (6th Cir. 2002) (quoting Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1276 (6th Cir. 1991)).*fn5

If, in fact, this case is preempted by ERISA, the next legal issue for consideration by the Court is whether Transamerica's denial of coverage to plaintiff should be analyzed under a traditional summary judgment approach or whether the issue should be analyzed under ERISA, in particular, 29 U.S.C. § 1132(a)(1)(B), which provides as follows:

A civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his Plan, to enforce his rights under the terms of the Plan, or to clarify his rights to further benefits under the terms of the Plan.

In Wilkins v. Baptist Healthcare Systems, 150 F.3d 609, 617-20 (6th Cir. 1998), the Sixth Circuit established guidelines under which district courts must adjudicate ERISA cases brought before them for judicial review. The Sixth Circuit explained that using summary judgment as a tool for adjudication of ERISA cases does not properly comport with the purpose of summary judgment. Id. at 619. Because the role of a district court in ERISA matters is not to determine whether issues of fact exist for trial, but to review the administrative record before it, district courts should more properly characterize their role in such proceedings as encompassing elements of both bench trials and summary judgments. Id. at 619-20. Following these ...

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